HONG KONG: IMF ISSUES WORLD ECONOMIC OUTLOOK

English/Nat (PLEASE NOTE: SOUND ON SOUNDBITES AS INCOMING) The International Monetary Fund (I-M-F) issued its World Economic Outlook on Wednesday in Hong Kong. The report projects strong growth worldwide, except in Southeast Asia, where the once fast expanding economies are currently struggling with currency crises. The I-M-F is especially bullish about the economies of the U-S, Canada, Western Europe and China. The International Monetary Fund (IMF) forecast in its new report Wednesday that global economic growth will expand to 4.5 per cent through the year 2002. Although the expansion is good news, the I-M-F warns that past cyclical trends could signal a recession if the high growth rate continues. Such a cycle has struck Southeast Asia, where several economies have been suffering - highlighted by a devaluation of their currencies. The I-M-F, however, has expressed confidence that the region's macroeconomic management is solid and predicts a recovery is just around the corner. SOUNDBITE: (English) "With a very sharp decline that has occurred in asset markets around the region, one suspects "Gee", there have been a lot of bargains. And as the recognition of that fact becomes somewhat more widespread and there is a good bases for it in my judgement then we will see greater restoration of confidence. This crises will then come to an end." SUPER CAPTION: Michael Mussa, Research Director, IMF Thailand's economy - once the glittering regional example - has fallen to the bottom of the pile. But I-M-F officials say they are surprised that positive government initiatives have not attracted investors more quickly to help rescue the Thai economy. Furthermore, Fund economists say the longer the countries of Southeast Asia struggle, the more their trading partners to the north and east will suffer. SOUNDBITE: (English) "That there is going to be some spin over to Japan, particularly on the export side, from the sharp slow down of growth in Thailand and still substantial slowdown of growth in Southeast Asia. And you mentioned also Korea, Korea it's really separate set of problems. In the end, those countries are quite important export markets for Japan." SUPER CAPTION: Michael Mussa, Research Director, IMF China's strength, however, should help keep Asia moving in a positive growth direction. Across the Pacific, the threat of increased interest rates has the rest of the world watching. But the I-M-F thinks that a small increase will not adversely affect global growth, as there is no huge jump on the horizon. SOUNDBITE: (English) "U-S interest rates are important to the rest of the world economy. So if the Federal Reserve does as we expect firm monetary condition somewhat 250-50 bases point or so over the next six months, interest rates on a worldwide bases will rise modestly. I will not however anticipate a big shock effect from such an increase." SUPER CAPTION: Michael Mussa, Research Director, IMF The Bundesbank is likely to raise interest rates as well, but once again the I-M-F predicts a tightening will be gradual. Europe is in for some criticism in the I-M-F report - particularly over unemployment, government spending, weak consumer demand and rigid labour markets. SOUNDBITE: (English) "That we are a lot more concern about what you can call the micro-economic foundations: The efficiency and flexibility of European labour markets which have contributed over the years to a gradual ratcheting up of the structural rates of unemployment. And this is the main criticism we are making of the project and of the master framework - that not sufficient emphasis has been put on the need to make labour market more flexible." You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/7ffb34d072a63fddd03c70addc122447 Find out more about AP Archive: http://www.aparchive.com/HowWeWork